Agilent Technologies A discussed its F3Q 2013 earnings yesterday. The company's shares are up over 2% as of the writing of this article. Based on the preliminary financial results for the quarter ended 2013-07-31 we analyzed Agilent relative to its peers (peer set at the end of this post).
Are Agilent's operating returns sustainable? Find out with this report.
The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
| Quarterly (USD million) | 2013-07-31 | 2013-04-30 | 2013-01-31 | 2012-10-31 | 2012-07-31 |
|---|---|---|---|---|---|
| Revenues | 1,652.0 | 1,732.0 | 1,680.0 | 1,767.0 | 1,723.0 |
| Revenue Growth % | (4.6) | 3.1 | (4.9) | 2.6 | (0.6) |
| Net Income | 168.0 | 166.0 | 179.0 | 425.0 | 243.0 |
| Net Income Growth % | 1.2 | (7.3) | (57.9) | 74.9 | (4.7) |
| Net Margin % | 10.2 | 9.6 | 10.7 | 24.1 | 14.1 |
| ROE % (Annualized) | 13.3 | 12.5 | 13.6 | 33.8 | 20.3 |
| ROA % (Annualized) | 6.4 | 6.3 | 6.8 | 16.8 | 10.1 |
Agilent is in Harvesting mode
Agilent Technologies, Inc.'s current Price/Book of 3.2 is about median in its peer group. We classify Agilent as Harvesting because of the market's low expectations of growth (PE of 17.4 compared to peer median of 28.4) despite its relatively high returns (ROE of 19.4% compared to the peer median ROE of 8.6%).
The company attempts to achieve high profit margins (currently 13.7% vs. peer median of 10.6%) through differentiated products. It currently operates with peer median asset turns of 0.7x. Agilent's net margin has declined 3.1 percentage points from last year's high but remains above its five-year average net margin of 11.2.
Agilent Earnings seem to be Peaking
While the company's revenues growth has been above the peer median (15.2% vs. 12.1% respectively for the past three years), the stock's PE ratio of 17.4 is less than the peer median. This implies that the company's earnings are peaking and the market expects a decline in its growth expectations.
Under-Investing in Growth
Agilent's annualized rate of change in capital of 11.7% over the past three years is around the same as its peer median of 10.7%. This investment has generated a better than peer median return on capital of 14.2% averaged over the same three years. The greater than peer median rate of return suggest that the company may be under investing in growth.
Trend Charts
Peers used for analysis of Agilent
Agilent Technologies, Inc.'s analysis versus peers uses the following peer-set: Danaher Corporation (NYSE: DHR), Thermo Fisher Scientific Inc. (NASDAQ: TMO), Life Technologies Corporation (NASDAQ: IFE), AMETEK, Inc. (NYSE: AME), PerkinElmer, Inc. (NYSE:PKI), National Instruments Corporation (NASDAQ: NATI), JDS Uniphase Corporation (NASDAQ: JDS), Cognex Corporation (NASDAQ: CGNX) and Itron, Inc. (NASDAQ: ITRI).
Company Profile
Agilent Technologies, Inc. is a measurement company, which provides core bio-analytical and electronic measurement solutions to the life sciences, chemical analysis, communications and electronics, diagnostics and genomics industries. The company operates through four reportable segments: Life Sciences, Chemical Analysis, Diagnostics & Genomics and Electronic Measurement. The Life Sciences segment provides application-focused solutions that include instruments, software, consumables, and services that enable customers to identify, quantify and analyze the physical and biological properties of substances and products. The Chemical Analysis segment products include gas chromatography systems, columns and components; gas chromatography mass spectrometry systems; inductively coupled plasma mass spectrometry instruments; atomic absorption instruments; inductively coupled plasma optical emission spectrometry instruments; molecular spectroscopy instruments; software and data systems; vacuum pumps and measurement technologies; services and support for company's products. The Diagnostics & Genomics segment provides solutions that include reagents, instruments, software and consumables that enable customers in the clinical and life sciences research areas to interrogate samples at the molecular level. The Electronic Measurement segment provides electronic measurement instruments and systems, software design tools and related services that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment, and microscopy products. This segment also offers customization, consulting and optimization services throughout the customer's product lifecycle. Agilent Technologies was founded in May 1999 and is headquartered in Santa Clara, CA.
Are Agilent's operating returns sustainable? Find out!
This article was first published on the CapitalCube Blog; Disclaimer.
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